XSport Sporting Goods Co. operates two divisions—the Winter Sports Division and the Summer Sports Division. The following income and expense accounts were provided from the trial balance as of December 31, 20Y9, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted:

Sales—Winter Sports Division	$10,500,000
Sales—Summer Sports Division	13,600,000
Cost of Goods Sold—Winter Sports Division	6,300,000
Cost of Goods Sold—Summer Sports Division	7,888,000
Sales Expense—Winter Sports Division	1,680,000
Sales Expense—Summer Sports Division	1,904,000
Administrative Expense—Winter Sports Division	1,050,000
Administrative Expense—Summer Sports Division	1,210,400
Advertising Expense	482,000
Transportation Expense	240,000
Accounts Receivable Collection Expense	120,500
Warehouse Expense	1,200,000

The bases to be used in allocating expenses, together with other essential information, are as follows:

Advertising expense—incurred at headquarters, charged back to divisions on the basis of usage: Winter Sports Division, $216,900; Summer Sports Division, $265,100.

Transportation expense—charged back to divisions at a charge rate of $8.00 per bill of lading: Winter Sports Division, 14,400 bills of lading; Summer Sports Division, 15,600 bills of lading.

Accounts receivable collection expense—incurred at headquarters, charged back to divisions at a charge rate of $5.00 per invoice: Winter Sports Division, 9,640 sales invoices; Summer Sports Division, 14,460 sales invoices.

Warehouse expense—charged back to divisions on the basis of floor space used in storing division products: Winter Sports Division, 94,000 square feet; Summer Sports Division, 106,000 square feet.

Required:

1. Provide supporting calculations for service department charges. If required, round per unit amounts to two decimal places and final answers to the nearest dollar.

2. Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Round your interim calculations to two decimal places, if required.

For each division: Sales minus cost of goods sold equals gross profit minus divisional selling and administrative expenses equals income from operations before service department charges. Service department charges are subtracted from income from operations before service department charges.

Answer rating: 100% (QA)

1 XSport Sporting Goods Co Service Department Charges For the Year Ended December 31 20Y9 Winter Spo... View the full answer